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The Stock Market Rally Lacks Conviction

As stocks continue to soar, with the S&P 500 ($INX) at 1,148 at one point during the day and the Dow Jones Industrial Average up around 200 points just today, investors who think the upward trend will continue may want to consider this: There is very little volume behind the market's move.

My colleague Dan Burrows points out in a story published on DailyFinance, that without volume, market action tells you not want people are doing, but what computer trading is doing.

Continue reading The Stock Market Rally Lacks Conviction

Fear has returned -- and it shows us where investor conviction is strong

Stocks that have held up best during this correction are most likely showing us where investor conviction is the strongest.

For example, one area that has held up surprising well is the Internet Protocol transport sector. Companies like Level 3 Communications Inc (NASDAQ: LVLT), Global Crossing Ltd (NADSAQ: GLBC), and Time Warner Telecom Inc (NASDAQ: TWTC) have changed little in price.

In previous corrections, these IP transport stocks would get crushed. However, that is not the case anymore.

This is a sign to stay with these stock and add to your position as the broader market continues to correct. If investors aren't selling these stocks now, it most likely indicates confidence is building in this space.

Additionally, Expedia inc (NASDAQ: EXPE), the online travel giant, has also held up very well, changing little in price during this correction. The stock has traded all over the place in previous corrections. This is a sign that investor confidence is improving here also.

All four stocks mentioned in this blog have good unit volume growth, operate low-cost businesses and appear to have pricing power returning to their industry -- a good combination to make some good money.

Symbol Lookup
IndexesChangePrice
DJIA-74.9212,454.83
NASDAQ-1.852,837.53
S&P 500-2.861,317.82

Last updated: May 28, 2012: 06:35 AM

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